Long way from dog days: 2011 might see record Dow

FILE - In this March 9, 2009 file photo, businessmen arrive at the New York Stock Exchange in New York. Fear and panic enveloped the stock market and the Dow Jones industrial average plunged to 6,547 on March 9. Many investors thought it would take a decade or longer to get back to the record of 14,165, set on Oct. 9, 2007. Now we could be on the verge. The Dow has soared 76 percent the past 21 months, and it would have to climb just 23 percent from Thursday's close of 11,499 to set a record. (AP Photo/Mark Lennihan, File)
— AP

FILE - In this March 9, 2009 file photo, businessmen arrive at the New York Stock Exchange in New York. Fear and panic enveloped the stock market and the Dow Jones industrial average plunged to 6,547 on March 9. Many investors thought it would take a decade or longer to get back to the record of 14,165, set on Oct. 9, 2007. Now we could be on the verge. The Dow has soared 76 percent the past 21 months, and it would have to climb just 23 percent from Thursday's close of 11,499 to set a record. (AP Photo/Mark Lennihan, File)
/ AP

- 1989. Mergers and acquisitions, including takeovers by corporate raiders, helped push the Dow up 27 percent. Kohlberg Kravis Roberts & Co.'s purchase of RJR Nabisco was the largest corporate deal the country had seen. In August, the Dow regained the level it had reached in August 1987, two months before that year's "Black Monday" crash.

- 1995. The Dow jumped 33 percent as what would become the longest economic expansion in U.S. history powered through its fifth year. And more Americans were putting money into stocks through 401(k) accounts. The number of households owning stocks jumped to 41 percent, up from 37 percent in 1992 and 32 percent in 1989, according to the Federal Reserve.

- 1996. The Dow rose another 26 percent as the economy continued strong. Stocks gained so much that Federal Reserve Chairman Alan Greenspan asked in a speech in December whether "irrational exuberance has unduly escalated asset values."

- 1999. Strong corporate profits and excitement about the Internet pushed the Dow up 25 percent. Earnings per share for the companies in the S&P 500 index jumped 28 percent, the strongest growth since 1994.

- 2003. The Dow rose 25 percent as the economy enjoyed its second year of recovery after the 2001 recession. The Federal Reserve cut short-term interest rates as low as 1 percent to encourage growth.

The two years the Dow rose 22.6 percent were 1986 and 1997. Each followed one of the strong years above as strong economic conditions continued.

Many analysts expect corporate profits will keep rising - and stock prices with them - but not at a rate that would send the Dow past 14,000 next year. Bank of America Merrill Lynch, for example, expects earnings per share for the big companies in the Standard & Poor's 500 index to rise 9 percent in 2011 and 6 percent in 2012. It sees the S&P rising 13 percent in 2011 from Friday's close.

Even Huntington's Bateman, who says the Dow could reach a record in 2011, warns stocks may not stay that high for long. Larger government deficits, he says, could drive stock prices lower in 2012 or 2013.